May 10, 2021
Last week was a busy one in the financial markets with several impactful economic releases, the real highlight being the jobs report on Friday. The Street was expecting nearly 1 million payrolls added, yet the number posted was a mere 266k. Bonds rallied sharply on the news, with the 10-year yield falling to its intraweek lows near 1.53%, only to reverse the move by lunchtime on Friday. The 10-year ended the week 5 basis points lower at 1.58%, while the 5-year fell by 7 basis points to 0.78%. Treasury yields seem to have settled into their new trading range, with 10s between 1.55% and 1.70%, and 5s between 0.75% and 0.85%. The weaker jobs report likely keeps the Fed on hold for a while, allowing Chair Powell to continue to call for patience in getting workers back on payrolls. Agency bullets widened a bit on the longer end of the curve and callables widened marginally across the curve. This week should be another busy one with the April inflation release on Wednesday, retail sales on Friday, and 10 Fed members scheduled to speak throughout the week.
Agency bullets remain near all-time tights, but 10-year bullets did widen by a basis point on the week. The Vining Sparks trade desk continues to move an above average amount of U.S. Treasury paper given how tight spreads are on bullets. Agency callables widened by 1 to 2 basis points for 3-year maturities and out. The bulk of the agency purchases last week occurred in 3- to 7-year paper, which has been the case for much of this year. The desk also continues to see demand for step-ups now that the curve has steepened to the degree that it has.
The following table reflects last week’s total issuance and call activity across the primary GSE issuers. Total issuance fell to $2.1 billion and total call volume dipped to $2.9 billion. The ~$10 billion in called agency paper in April was the lowest monthly call amount since February 2019. For specific call dates and amounts for individual bond portfolios, be sure to log in to the Client Portal on the Vining Sparks website.
Last week Fannie Mae passed on its second Benchmark slot within a week. The Federal Home Loan Bank has a Global issuance slot this Wednesday, May 12th. Freddie Mac has an upcoming Reference slot next Wednesday, May 19th.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP